Thoughts for the Week | Positive Rate of Change | May 19, 2017
Once a year the top advisors at Morgan Stanley get together for a “Chairman's Council” to compare notes, sharpen the saw and connect with senior leadership. One of the highlights of this year’s meeting was a talk by Peter Diamandis about the accelerating pace of technological change and the resulting benefits accruing to mankind. World problems at times seem insurmountable and the news headlines are overwhelmingly negative, so Diamandis’ talk was a breath of fresh air.
Diamandis is on a quest to “study exponentially growing technologies and their ability to transform industries and solve humanity’s grand challenges.” He holds an undergraduate degree in Molecular Genetics, a graduate degree from MIT in Aerospace Engineering, and an M.D. from Harvard Medical School. He is the founder of eighteen companies and the X PRIZE Foundation, and a New York Times bestselling author. His two main messages – i) mankind’s “arc of progress” is continuing and even accelerating; and ii) the exponential changes in technology that are occurring - science fact instead of science fiction – are likely to create massively positive changes for mankind.
Things Are Better Than They Seem
Harry Truman once said that "The only thing new in the world is the history you don't know,” and students of history will recognize that quality of life for most of mankind has vastly improved over the last couple of hundred years. Consider that from 1800 to 2015:
· The % of the world population living in extreme poverty dropped from over 90% to less than 15%
· Child mortality in the first five years of life dropped from over 40% to less than 5%
· Global average life expectancy increased from 35 years to 71.4 years
· The annual number of hours worked per year per person dropped by 50%
Despite the media’s often gloomy view, the world has also gotten safer and less violent. The number of world-wide deaths in battle, deaths in genocides and mass killings, incidents of physical and sexual abuse in schools, incidents of rape and sexual assault, and automobile and airline fatalities per 100 million miles traveled all having decreased since World War II, in some cases dramatically.
Progress has been driven by changing demographics and improvements in technology and governance, encompassing everything from the printing press, increased literacy and access to education, better plows, germ theory, genetics and the rise of democracy, property rights, and the rule of law.
Yet Diamandis sees massive potential in a relatively new factor - the ascendance of technologies that all ride on the back of the exponential improvements predicted by Moore’s Law. Humans are not really wired to appreciate the impact that exponential change can create over years or decades. Consider these examples:
· The cost of lighting (think whale oil lamps and candles vs LEDs)has dropped from over ￡ 35,000 in the year 1300 to close to zero today
· Since 1958 the cost of an integrated circuit has decreased by a factor of 10,000 and the power of integrated circuits has increased 10,000 fold – resulting in a 100 million fold improvement.
· Data storage, bandwidth capacity, the speed and cost of genetic sequencing, artificial intelligence, machine learning, computer graphics, Big Data, robotics, sensors etc. have all experienced similar exponential gains.
· In 1976 a digital camera with 0.1 megapixel resolution weighed 3.75 pounds and cost $10,000. By 2014 a camera with 1,000 x better resolution weighed 3/100 of a pound, cost $10 and fit in your phone
· In 1981 the first portable GPS system weighed 53 pounds and cost $120,000. Today the GPS chip in your phone that makes Google Maps and UBER possible costs $2.
Diamandis points out that these exponential technologies don’t exist in a vacuum. They interact with each other. They augment each other. They accelerate each other. “For example, the intersection of Networks, A.I. and 3D printing will soon allow anyone to verbally describe what you’d like to see created, and then turn it into a design file that is uploaded to the cloud, 3D printed and delivered later that day to your doorstep. In much the same way that Microsoft Word makes us all perfect spellers.”
If you want to start your day on a positive note spend some time on the Diamandis website, https://www.diamandis.com/dataor watch his 2012 TED Talk, Abundance is Our Future, https://www.ted.com/talks/peter_diamandis_abundance_is_our_future. You'll see robots walking unassisted through snowy woods, apartment buildings being 3D printed in concrete, and tailored cancer treatments based on the genetic sequencing of the patients and their tumors.
We’ve read Diamandis’ book, Abundance, and seeing him in person was a great reminder that change is constantly occurring, at an accelerating pace, and mostly for the good. No president or government is likely to be able to contain the rate of change for long.
We are long-term optimists. We believe that the communities, institutions and companies that humans build are creative, resilient and tend to get better over time. We temper that optimism with a pragmatic, "hope for the best and plan for the worst," approach as planners and as investors. As Nassim Taleb has so eloquently written, “antifragility” is our goal.
So while we share Diamandis’ optimism and believe he is directionally right, we also appreciate that the arc of human progress is a lot like the arc of financial markets - bumpy and punctuated by setbacks, sometimes severe, before inevitably lurching forward again.
Enjoy your reading and your weekend,
Mike, Scott & Zack
Private Wealth Advisors
Mike Burbank, Managing Director Wealth Management
Scott Hafeli, CFA
Zack Schiller, CFP
Morgan Stanley Private Wealth Management
555 California Street, 14th Floor | San Francisco, CA 94104
Office: 415 576 3131
Sources:
Abundance – The Future Is Better Than You Think
Diamandis website, https://www.diamandis.com/data
2012 TED Talk, Abundance is Our Future, https://www.ted.com/talks/peter_diamandis_abundance_is_our_future
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